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Scoreboard: China guide

The local market is tipped to take the lead from a weaker Wall Street, with China’s GDP figures the focal point this week.

Not even happier US consumers can shake the market out of its rut. According to Michigan University, consumer confidence rose by over 3 per cent or 2.6 points in April, up from 80. That’s not bad, it’s good -- this is the most confident consumers have been since July last year. Yet equities sold off and consumer stocks even underperformed. Most of the news-flow and press commentary was really quite non-specific as to what drove the fall and to be fair news-flow was light; more sellers than buyers, it seems. Whatever the cause, volumes are decent. Naturally this doesn’t suggest the Aussie market will have a great session today and the SPI points to a 0.3 per cent fall.

Equities slumped again on Wall Street. The Nasdaq led, again, with a 1.3 per cent fall to 3999, following a 3.1 per cent drop in the previous session. Recall this was the largest drop since November 2011. The S&P500 wasn’t too far behind with a 0.95 per cent fall (1815), while the Dow lost 143 points to 16,026. Over in Europe, losses were equally severe with the Dax off 1.5 per cent, the CaC losing 1.1 per cent and the FTSE falling 1.2 per cent.

Commodities were generally weaker although moves weren’t huge. Gold fell $1.4 to $1318, while silver rose 0.7 per cent. Copper was then 0.1 per cent. Finally crude was weaker -- Brent off 0.2 per cent to $107.3, while WTI was more or less flat, edging down 0.1 per cent to $103.4.

Forex markets saw the euro weaken (53 pips or so to 1.3839) after comments from Mario Draghi that any further strength in the euro could see the European Central Bank ease policy further. Expectations are building for the central bank to engage QE, and certainly another ECB member (Benoît Coeure) was out stating that the ECB could conduct asset purchases if inflation didn’t lift. Similarly, the British pound dropped 60 pips to 1.6716, while the yen is at 101.6. As for the Australian dollar, it’s up smalls from Friday at 1630 AEST, at 0.9389.

Rates eased again as US Treasury prices pushed higher. The US 10-year yield fell another 2 bps to 2.62 per cent, which brings the fall in the 10-year yield over the last week or so to 16 bps. The 5-year yield lost just under 2 bps to be at 1.57 per cent, while the 2-year sits at 0.35 per cent. Aussie futures in turn were up 1 tick on the 3s to 96.99 and 2 ticks on the 10s to 95.995.

Elsewhere, things were comparatively quiet. Most of the data around was about inflation. So for instance in Germany the final estimate of March consumer inflation was confirmed at 0.9 per cent annually. Over in the US, producer prices accelerated a bit, rising 0.5 per cent in March to be 1.4 per cent higher annually. Over in Britain, construction output took a dive, falling 2.8 per cent in February -- the biggest fall since November last year.

In markets this week, I think the key focus for investors will be the Chinese GDP figures on Wednesday at around 1200 AEST. The consensus expectation is that growth slowed to 7.3 per cent in the March quarter, from 7.7 per cent. Alongside those growth figures, we also see Chinese retail sales, industrial production and fixed investment. Elsewhere abroad the key US data comes out tonight: US retail sales. Otherwise on Tuesday we see US consumer inflation figures, the Empire State manufacturing index, the NAHB index and a speech from the Fed chair, Janet Yellen. For Wednesday’s session, US housing starts and industrial production are out, while finally on Thursday we see the usual weekly job claims numbers. There’s also a spread of Fed speakers for the week, but Yellen’s commentary will be most closely watched.

Domestically, the Reserve Bank’s credit numbers today at 1130 AEST are probably the key data. Certainly the central bank’s minutes on Tuesday 1130 AEST are out, but we already know they are on hold -- the RBA board has completely misread the economy anyway, especially on the labour market. They’ll spend some time playing catch-up, and against that backdrop their comments are of less use.

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